Crisis Management Strategies For Businesses

Risk Summary Table

Crisis Management is an application of the strategies which is designed for helping the business organizations to deal with a significant negative event. The crisis will occur as the result of unpredictable event or unforeseeable outcome of an event which has considered as the potential risk. Decisions must be made quickly for limiting the amount of damage to the organization. For this reason, the first action in crisis management defined plan is to identify the individual and serve as the crisis manager. The risk is a potential activity which can be harmful for the organization’s reputation, revenues, finance, market position and its capacity of delivering the services.

Risk Summary Table

Risk Category	Risk Type	Stakeholders Affected Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Likelihood Rating	Consequence Rating	Risk Control Method
Internal	Human Factors	Internal stakeholders	D	D	Improvement of the human capital management strategies followed by the organization.
Internal	Technological Factors	Internal and External stakeholders	B	B	Integration of recent technologies within the framework of an organization so as to improve the business processes and also the quality of services offered to the customers.
Internal	Physical Factors	Internal and External stakeholders	C	C	Establishment of outlets which are at suitable business locations.
External	Economic Factors	External stakeholders	D	D	Provided discounted offers to the customers to attract them towards the food items sold by the company.
External	Natural Factors	External stakeholders	E	E	Changing the menu offered by the company and making it healthy.
External	Political Factors	Internal and External stakeholders	E	E	Forming effective business relationships with the national governments.

Types of Risk

1. Political Risk

Political risk is a risk where the investment returns suffer majorly due to the result of instability and political changes happening in a country. Instability will affect the investment returns could take place from the government charges, foreign policy, legislative bodies. Political risk is also referred to as the geopolitical risk and becomes the major factor of time horizon of an investment plan (Kam, 2012).

KFC is one of the well-known food chains and the most significant option was when the company planned to enter the China. The company had a risky international business strategy. An expansion into China has been recommended. The market size and potential growth of the market is in association to the improvised political stability and therefore making the Chinese market very attractive (Graham, 2012).

Methods of Controlling the Political Risk

1. Avoiding Investment- The best and simplest way of managing the political risk is avoiding investing in the country which is ranked high on any risks. The investment has been made; enterprise may get wound up and transferred to any other nation(Fails, 2014).
2. Adaptation-This is another method of managing the political risk. Adaptation implies the incorporation of risk into the business strategies. MNC can incorporate the risk through different strategies such as local equity and insurance and providing the development assistance(Manzo, 2013).
3. Threat-Political risk can be managed by trying to improve the host country which cannot work without the firm activities. This can be done by the control of raw materials, distribution channels, technologies in the host country. The enterprise can threaten the host country when the supply of materials, technology is stopped as its functioning gets disrupted(Fagersten, 2015).

Time Frame- Exposure to political risk, this includes tax and royalty changes, security concerns, confiscation of any asset this will have the direct impact on the company’s top management and middle management. The significance of valuation and political risk will vary between costs and complexity. Depending on the major segment, business models, the costs can be moved on and have a positive or negative impact over the revenues (Brown & Harman, 2011).

The Responsibility of Stakeholder-Recognition of institutional investors and investment managers and board of the public companies needs to answer following questions-

1. What is the level of the company’s exposure to political risk?
2. How the risk is monitored and captured?
3. Whether the company’s investment strategy and capital allocation are appropriate given the emerging and present political dynamics(John & Lawton, 2017).

Risk Mitigation-The leading companies can manage today’s political risk. The functioning of political risk is underpowered and isolated. Typically, the risk can be realized through the advanced proceedings of any transaction. Horizontal risk functions like compliance, enterprise risk management and legal management political risk will be regarded as the price paid for doing business activities (Fortunato & Turner, 2018).

Political Risk

Future Action and Plan of Action-The research indicates that the future course of action will result from the composition and the style of the board. The problem lies in ineffective organizational design which is evident from the leading companies. For investors, political risk will be acting as an alarm as it suggests companies can succeed in spite of political risks. This makes sense as economic risk has dominated the macro surroundings. The companies must have the proper structure to cope up with economic risk and political risk. This includes management of workforce for meeting the demands and launching products which are targeted at the price sensitive customers during the times of economic recession (Kerner & Lawrence, 2012).

Business Impact-In the risk inverted surroundings, political consequences and actions pose important concerns rather than economic trends. This implies not having the consideration towards political risk is likely to affect the decision making. Avoiding new investments and not increasing the internal risk threshold (Hubscher & Sattler, 2016).

2. Economic Risk

Economic Risk refers to likelihood wherein macroeconomic conditions can affect the investment or company prospect abroad or domestically. The economic risk can include fluctuations in exchange rates, government policy shifts, political instability or the introduction of political and economic sanction. An element of risk is always associated with investing money into a business. Economic risks are the most difficult to be foreseen. In project financing, this economic risk has a high likelihood to have an impact on the business output (Beazer & Blake, 2018). KFC has reopened its outlets in Zimbabwe after month longevity of economic closure.

Methods of Controlling the Economic Risk-

1. Entity Insight-This is a cost effective and fast solution for identifying and reducing the economic risk in vast business operations. This tool monitors global suppliers and local third party business ventures by leveraging business intelligence and help the businesses to manage the global supply chain risk. This solution helps the enterprises to capture the in-depth view of regulatory, economic and strategic risk factors. An alignment of internal company policies and risk based methodology is possible(Triana, 2017).  
2. Purchase Insurance-Assessment of liabilities and legal regimes determine which insurance is required for the business. This can include disability insurance, professional insurance, operational insurance and life insurance. Purchasing insurance allows the transference of risk to the insurance companies (Harman, 2011).  
3. Implementation of Quality Assurance policy-The good reputation can be imperative, of searching for the sustainable business. Customer service is regarded as key to success when any products or services are offered. It is important to conduct the test of products and services and achieve the highest quality. By analyzing and testing, necessary adjustments can be made (Simpson, 2007).

Time Frame-Time frame has been associated with the employee training. When selling the products or services, it is crucial to set goals and responsibilities for the employees. Training the employees to focus on quality and not quantity, this can avoid the declining sales risk occurring due to high pressure which customers will not appreciate. Innovation is the key to success and company needs to constantly rely over next innovation for the purpose of growth.

The Responsibility of Stakeholder-Current employees shall head to form the risk management team. This will be a wise idea if someone within the team is having experience in this domain and can act as the leader. The company can also make the payment for the outsider risk management team that can be a worthy investment. All the risks and threats are based on the business type and strategies can be made for prevention and mitigation of risks (Denuit & Eeckhoudt, 2013).

Methods of Controlling the Political Risk

Risk Mitigation-The world has been changing quickly. Risks will be emerging and companies need to deploy the diversification strategies. This can be effective against the unexpected risks. Provided the shifting economic, social and political factors, it is a time to start a business with exporters. The major benefits are to export to multiple global markets and diversification of reducing risks that come with one particular place.

Future Action and Plan of Action-All markets have risks, knowing when it is surmountable and whether the benefits can outweigh the hazards. These are the defining factors of a venture. The business executives need to understand how the company can be affected through the adverse events. Regulatory changes can create the problems like delivery days and civil disturbances can shut down the whole company. The company needs to be prepared or end up losing the all business.

Business Impact-The planning of an organization to expand into unchartered and new territories, which are already having transactions and the business in abroad needs to seek the tangible cash-flow precariousness. This safeguard needs to understand about risk mitigation executives and how they control the adverse effect on business.

3.   Technological Risk

The modern day business is highly reliant over technology. The prolific use of smart phones, internet and computers has built themselves as back on technology. With such reliance, there are certain potential technological risks. The organization faces these technological risks in its hardware, software or online applications needs to compromise through the equipment fails or cyber-attack.  In the present environment, data breaches are one of the risks that can occur in all sizes of organizations. Financial information or personal records can be stolen in the black market through criminals in a few days.

KFC has closed its many stores due to the delivery problems and fast food restaurant has reported the loss of £ 1mn in a day. Another issue is about handling the PR. Large businesses have an impact over the deliveries, especially when the transition is new.

Methods of Controlling the Technological Risk

1. Identification of key risks and measurement of probability and impact-As soon as the information is collected, organizations need to identify the concern areas and measure the occurrence probability. This will assist the organization in the development of mitigation plans. Most of the organizations need to hire the IT specialists in assisting with the process.
2. Analyzing security threats-This includes external threats such as cyber-terrorism and cyber-crime along with internal threats like distribution of the restricted information. Organizations need to review the security requirements which are in association to system control and access, data integrity, security tracking. In addition, the exceptional handling system is required for security controls and also system performance in recovery conditions.
3. Analyzing hardware and software failure risk-Organizations need to consider what are the different risks associated with hardware or software failure of the startup venture and for its overall operations. How stable is the software and equipment in the organization. What are the potential failure consequences? Analysis of outsourcing risks. The Third party must be able to handle the network administration, application hosting, and disaster recovery options and cloud computing.

Time Frame-New technologies have started revolutionizing the ways in which businesses are conducted. This offers incredible benefits to the organizations. However, reliance on the technology will increase risk exposure. When technology will get fail, business disruption will result in revenue losses and lost customer confidence. The time frame for creation of an effective technology is analyzing the risk management strategy and organization’s profitability along with corporate reputation can be analyzed.

Economic Risk

The Responsibility of Stakeholder-Switching suppliers, especially one that provides the critical service like logistics, identification of risks as they escalate and major problems are essential for effective sourcing. The procurement team needs to seek reassurance for vulnerable areas and address the change supplier ensuring risks get mitigated.  

Risk Mitigation-The determination of how to effectively manage the technology risk, it is essential to understand the different types of technology risks. To protect the business from financial, reputational, regulatory and strategic risk, it is essential to prepare with the technological risk management. There are a number of cyber security and technology risks. As the technology advances, hacks are more sophisticated and there are greater risks of technology disruptions (Burns, Peters & Slovic, 2011).

Future Action and Plan of Action-Automation is incredibly helpful for the enterprises. This will lead to elimination of technology risks and has a positive publicity. The supply chain will not suffer with automation. There must be a risk management technology strategy in place for anticipating the potential problems before it takes place.

Business Impact- Operations staff must be asked for the evaluation of technology as a part of the enterprise risk effort. Regulators in regulated industries can drive the requirements towards focusing the technology management. Most of the regulators require programs to be in place.

Conclusion

The enterprises face uncertainty. This effect on the organization objective can be referred to as risk. The challenge is posed in front of management to determine what the acceptable levels of risks are and how this will be managed to an acceptable level. Risk can be termed as an event which results in loss or harm. Risk also implies opportunity or chance and includes the processes, systems, strategies. People must be directed towards the effective management of potential opportunities and threats. The main goal of the risk management in an enterprise is to provide the stakeholders with assurance that the roles and responsibilities of the organization will be achieved.

References

Beazer, Q., & Blake, D. (2018). The Conditional Nature of Political Risk: How Home Institutions Influence the Location of Foreign Direct Investment. American Journal Of Political Science, 62(2), 470-485.

Brown, G., & Harman, S. (2011). Risk, Perceptions of Risk and Global Health Governance. Political Studies, 59(4), 773-778.

Burns, W., Peters, E., & Slovic, P. (2011). Risk Perception and the Economic Crisis: A Longitudinal Study of the Trajectory of Perceived Risk. Risk Analysis, 32(4), 659-677.

Denuit, M., & Eeckhoudt, L. (2013). Risk attitudes and the value of risk transformations. International Journal Of Economic Theory, 9(3), 245-254.

Fägersten, B. (2015). Political risk and the commercial sector – Aligning theory and practice. Risk Management, 17(1), 23-39.

Fails, M. (2014). Leader Turnover, Volatility, and Political Risk. Politics & Policy, 42(3), 369-399.

Fortunato, D., & Turner, I. (2018). Legislative Capacity and Credit Risk. American Journal Of Political Science, 62(3), 623-636.

Graham, B. (2012). Political Risk and Experience: The Effect of Prior Experience on Firms’ Political Risk Sensitivity. SSRN Electronic Journal.

Harman, S. (2011). Governing Health Risk by Buying Behaviour. Political Studies, 59(4), 867-883.

HÜBSCHER, E., & SATTLER, T. (2016). Fiscal consolidation under electoral risk. European Journal Of Political Research, 56(1), 151-168.

John, A., & Lawton, T. (2017). International Political Risk Management: Perspectives, Approaches and Emerging Agendas. International Journal Of Management Reviews, 20(4), 847-879.

Kam, C. (2012). Risk Attitudes and Political Participation. American Journal Of Political Science, 56(4), 817-836.

Kerner, A., & Lawrence, J. (2012). What’s the Risk? Bilateral Investment Treaties, Political Risk and Fixed Capital Accumulation. British Journal Of Political Science, 44(01), 107-121.

 Manzo, G. (2013). Political Uncertainty, Credit Risk Premium and Default Risk. SSRN Electronic Journal, 1-3.

Simpson, J. (2007). The Effects of Extreme Political Acts and Political Risk on International Banking Systems. SSRN Electronic Journal, 1-5.

Triana, P. (2017). Business Schools and Political Risk. SSRN Electronic Journal, 1-4.